Energy and Natural Resources Market Radar (March 19, 2012)
Strengths
- U.S. exports of steel products reached 1.14m tons in January, the highest level in the last 14 months, according to the U.S. Census Bureau.
- European refineries increased imports of crude from OPEC members last year to make up for the loss of Libyan barrels, the IEA said. European refiners had turned to OPEC members Saudi Arabia, Nigeria, Iraq and Angola to fill the gap. European members had imported more than 1.1 million barrels a day of Libyaâs total 1.3 million barrels a day of crude exports before the civil war broke out.
- Saudi Arabiaâs Oil Minister, Ali al-Naimi, said this week that the country, the worldâs largest crude exporter, can make up for any shortage in global supply, seeking to assuage markets in which prices have jumped on concerns over flow disruptions.
- Comments from oil tanker company Frontline this week indicate the tanker market is picking up markedly. Demand in the crisis-hit tanker market has picked up considerably in recent weeks helped by surprisingly high activity from ships transporting oil to China. The company says it sees an incredible amount of fixtures from the Persian Gulf at the moment with rates between $25,000 â $30,000 per day and those rates should hold, given Chinese oil demand.
Weaknesses
- Gold fell to a 10-week low this week as investors shed haven assets.
- Natural gas futures hit a fresh 10-year low price of $2.27 per mmbtu this week on weak heating demand and surplus supply.
- Environmental and health groups are calling for tougher U.S. regulation of hydraulic fracturing for natural gas, turning down a one-time donor to their causes, Chesapeake Energy Corp. The Sierra Club, the largest U.S. environmental group, is rethinking early support of natural-gas development after activists and scientists linked the drilling to tainted water and increased air emissions. The group turned down $30 million from Chesapeake after Executive Director Micheal Brune took it over in 2010.
- European imports of containerized goods fell 5.2 percent in January, according to data from Container Trade Statistics.
Opportunities
- Copper will average $4.10 per pound in 2012, while prices are unlikely to average less than $3.80 per pound in the next five years, according to a mining-studies group in Chile. Copper supply will fall short of demand by 200,000 metric tons this year, while the deficit in 2013 will be smaller, said Juan Carlos Guajardo, Executive Director of the Center for Copper and Mining Studies.
- India coking coal imports have been said to jump 22 percent this year, the Steel Authority of India Chairman CS Verma said at the Coaltrans India conference in New Delhi. India is critically short of coking coal, he added. He further said pricing pressures exist in the coking coal market because a few companies control supplies and the shift to monthly contracts for coking coal will increase volatility.
- Headlines in the agricultural sector are continuing to remain positive for plays within the space. A survey recently showed that palm oil, used in everything from candy bars to instant noodles, will advance 3.4 percent to the highest in more than a year by June as cooking-oil supplies drop to the lowest in more than three decades. Additionally, wheat and flour imports by Indonesia, Asiaâs biggest buyer, may also gain at least 6 percent this year as rising incomes boost food demand in the worldâs fourth most populous country.
- Indiaâs steel production is set to rise to 125 million tons in 3-4 years from 75 million tons now, said the executive director at Steel Authority of India Ltd.
Threats
- According to the International Energy Agency, OPECâs crude oil production rose for a fifth month to the highest in more than three years as Saudi Arabia and Libya boosted supply. OPECâs 12 members produced 31.42 million barrels a day of crude last month, the most since October 2008, the agency said this week. This could create downward pressure on the price for crude oil.
- Iranâs oil exports will decline by between 800,000 and 1 million barrels a day from the middle of this year as sanctions hinder purchases worldwide, the International Energy Agency said this week. While there currently may be no physical supply disruption, European insurance companies have already announced the suspension of coverage for tankers calling at Iranian ports. Iranian output fell 1.5 percent to 3.38 million barrels a day in February, the lowest in at least three years.
- Crude oil prices dipped briefly this week on the news that President Obama and British Prime Minister Cameron had agreed to authorize releases of their countries' strategic crude reserves.
